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    Global Natural Rubber Production All Set to Increase in 2019

    March 18, 2019 | Agro

    As per the latest statistics released by the Association of Natural Rubber Producing Countries (ANRPC) — whose member countries account for about 90 percent of the world’s natural rubber production — nearly 14 million tons of natural rubber was produced in 2018, a 4.6 percent increase from the 2017 level.

    Most ANRPC member countries saw an uptick in output — Thailand (+9.4 percent), Indonesia (+4.0 percent), Vietnam (+0.5 percent), China (+4.3 percent), Cambodia (+13.9 percent) and the Philippines (+8.7 percent). Although Indonesia might have witnessed a marginal dip in output according to some field researchers, it wasn’t significant enough to impact the market.

    Asia is the largest hub for natural rubber production in the world (90 percent of the total global production). The top three producer countries are Thailand, Indonesia and Malaysia, which together account for about 70 percent of the total natural rubber production globally. About 90 percent of the total global supply is fulfilled by small-scale farmers.

    Lagging Supply Due to Long Growth Cycle of Trees

    The production of natural rubber is determined by a number of factors — the area for tapping, the yield of trees, as well as farmers’ initiatives for tapping. Also, one must consider that for natural rubber, the planting area does not equal to the area for tapping, as it would normally take 5-6 years before a newly planted rubber tree can start producing latex. It is also vital to understand that the yield of a tree is lower during the first few years of production and increases year-by-year to reach a relatively high and stable level when the tree is about 10 years old. After that, the tree can continuously produce latex for 20-30 years.

    Due to the long growth cycle of rubber trees, production cannot catch up immediately when there are major demand changes, leading to gaps between supply and demand.

    High Yields Expected in 2019

    As rubber garden owners can hardly predict what the price of rubber will be after 7-10 years, they consider expanding their planting areas only when prices rise and profits from tapping are high. On the other hand, when demand is high, even if rubber farmers extend the tapping time or cut extra holes in rubber trees to increase the yield, newly added yield would still be limited.

    During the financial crisis in 2008–2009, rubber trees were felled in producer countries due to the low profitability of rubber tapping. This resulted in a rarely seen year-on-year decline of the global natural rubber planting area.

    In 2009–2010, demand rebounded rapidly, but in the face of insufficient supply, the global rubber market enjoyed a super bull market, which triggered an increase in rubber tree planting. In 2010–2012, rubber trees were planted in record numbers, covering about 500 thousand hectares per year, which far exceeded the levels of the previous decade. As rubber production starts some seven years after planting, the trend of the massive release of new tapping area will continue in 2019.

    Besides, most rubber trees planted after 2008 were high-yield clones with better resistance and stronger stability. Therefore, it is possible that the actual yield in 2019 would further exceed current market expectations.

    Greater Initiatives to Increase Tapping

    Overall, farmers’ initiatives for rubber tapping in major producer countries were on the decline during the past few years due to bearish prices. An exception was Indonesia, where the correlation between farmers’ initiatives for tapping and natural rubber prices were not statistically obvious. Also, it is not easy to store natural rubber for a long duration, which eliminates hoarding/inventory build-up. In 2019, the overall market structure will see some changes.

    • Thailand announced a “one-village, one-kilometer rubber paving” plan to boost domestic rubber consumption.

    • China issued favorable policies for rubber farmers under forms such as “income insurance” and “precise poverty alleviation”.

    • Malaysia re-launched the minimum purchase price policy for cup rubber in some states.

    • India also issued policies to stimulate farmers’ initiatives and planned to increase technical support to small rubber farmers as well.

    In addition, the gradual popularization of automated tapping machines — which liberates rubber farmers from heavy physical labor — would also contribute to higher initiatives for tapping.

    Forecast for 2019

    According to the International Rubber Study Group, the global consumption of natural rubber would increase by about 3 percent in 2019 compared to 2018.

    A comprehensive review of supply, demand, inventory and current market prices would suggest that prices would most likely hover around the present low levels. From a trade perspective, China will continue to be the largest importer of natural rubber and will consume more than 40 percent of the global output.

     

    Tags: environment , natural

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